When thinking about credit strategy there are a lot of ways to use your credit—as well as someone else credit—to accomplish your goals. Ensuring that your credit is in good working order is one thing, but you can also find someone else who has good credit that would be willing to help strengthen your profile. When using someone else credit card accounts to add to your credit file you can accomplish this in two primary ways:
1) Authorized users
2) Joint Account Holders
Authorized users are individuals that are allowed to be added to a credit card account, typically one that has an excellent history. The purpose of this is to help boost the persons credit file that is being added with the good credit history from the person that is adding them. In other words you can look at it as piggy backing off of someone else good credit. This is typically a family member, or it could be a close friend or business partner. There is no harm to the person being added, but you want to be mindful that whoever is adding you—your credit will suffer if there is a change in their credit or payment status.
Joint accounts are really great to have, provided you can find someone that has a very good credit card account, with good history, and someone that is willing to allow you to become a joint account holder. You can find someone to purchase these from but the search isn’t an easy one and they are very expensive. These are ideal because they show up on your credit as if you own the account, when in all actuality you’re being added—just like an authorized user. The difference being that these accounts show up on your credit differently and have a much better impact to your score than do authorized users.
Want to help your kid or spouse build credit? Add them as an authorized user, or AU, to your account rather than signing up for a joint credit card. Your child or spouse will benefit right away because their credit report will immediately be populated with the account’s history. This financial relationship also gives you greater control over the account and what you do with it. While you will be the only one responsible for repayment of the debt—authorized users don’t have any legal obligation so you can end the financial tie without needing the AU’s permission. This can be especially helpful if the AU’s spending goes wild or there’s a separation or divorce between the spouses, for example. You also want to ensure that if you are being added to a card that the utilization vs. the credit limit is below 50%. A card that is over-utilized will hurt you.
Problem: You need to strengthen your credit with good tradelines and history so you can apply for other permanent credit card accounts or get other approvals.
Solution: You will need to find someone that has good accounts that will be beneficial to your own credit file. These are typically credit card accounts that someone has built and maintained over time, in good standing, and with good history. The accounts also should have high limits.
2015 CREDIT RESTORATION PROGRAM
If you are interested in our Credit Restoration Program where we consult our clients on restoring their credit profiles to align with their personal and professional goals email me now at dean@deancantave.com with the subject line, “Credit Coaching/Consulting Services” to schedule a 30-minute consultation. I want to START you off on the right foot in 2015!
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